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Those who haven’t owned a business tend to think businesses are built on mystical gut feelings that readily morph into bulging bank accounts, hot cars and holidays. Sure, Mark Zuckerberg and Bill Gates did just fine by following their hunches, but the hype overshadows the massive amount of work it took to make Facebook and Microsoft successful.

Statistics on the failure rate of small businesses can be sobering. Conventional wisdom suggests that about half of small businesses (those with revenues under $30,000) survive after three years, while approximately a third survive after five years. To be sure, this category of business activity, also referred to as micro-enterprise, includes a lot of businesses that are simple to start and easy to jettison when something better comes up. The statistics deal with the most developmental business arena, where a lot of newbies cut their entrepreneurial teeth. It also includes a lot of drive-bys who jump in long enough to check out the self-employment scene, and bail out once they realize they’re earning less than minimum wage.

Whatever else the high failure rate of new business tells us, it hints that success is more than blind luck. Some would characterize entrepreneurs as risk takers. While there’s a bit of truth to this, successful business owners are not so much gamblers as they are effective risk managers.

One of the cornerstones to becoming an effective risk manager is to find a healthy balance between intuition and due diligence. Due diligence is the research needed to validate your hunches and clarify your business case. A business case is built on more than notions and dreams; it has to have a solid indication of demand for your goods, customers that are willing to pay the right prices, and a bulletproof plan for getting in front of customers.

New business owners can increase their chances of survival by doing due diligence in the following three ways.

1. Validate the Demand. To confirm demand for products or services, business owners will learn all they can about their customer’s wants and needs. This education can come through a combination of reading, working in the target industry, conducting surveys, and most importantly, talking to customers.

2. Validate the Prices. When it comes to setting prices, there’s no confidence builder quite as convincing as making sales. However, prior to making sales, entrepreneurs can learn about pricing by knowing what it costs to produce their goods, and by learning everything they can about the industry and in particular, the competitors. The Internet is by far the easiest source of information on prices.

3. Develop a Marketing Plan. Think of marketing as everything you will do to communicate to potential customers. Your marketing plan will detail how you’ll get your goods in front of customers, including costs each marketing campaign or activity.

Business success is much more than a crap shoot, and much riskier than buying a lottery ticket. It’s also true that business, managed effectively, is a surer path to success than gambling. And if you enjoy the work you do, it can also be fun getting there.

Gates and Zuckerberg are inspirations for us all, but don’t be blinded by the hype. If you’re feeling intuitive and lucky, buy a lottery ticket. If you want to build a successful business, by all means follow your instincts, but do your homework by validating your hunches before putting any significant investment on the line.

Planning out a business can be a very hard job, especially due to the fact that it involves so many people. The more people involved, the higher the uncertainty and tougher to carry out small business planning. Knowing what to do and when to do it can be tough. The advantage with a small business is that since you are doing it on a smaller scale, the effect of your mistakes are smaller, giving you the opportunity to learn from them and never repeat them when your business begins to grow.

Small business planning can help you maintain a flow in what you do. You can either take help from a professional or do it based on your own experience and knowledge. Though long term business planning should be done with the help of a professional, like a mentor since he can recommend certain adjustments and provide references and help your business grow by asking you to maintain certain outlines:

Know your goals and know when you have reached them: with the business being small, you can try out new and unique ideas. But in doing so, do not get too involved in your day to day work and lose track of what you actually set out to do. It is always a good idea to present objectives before oneself and complete them before due time. A good mentor can help you do that and also keep track of your progress.

Keep an outsider: Have some on the outside as well. It can be your best friend, your mentor or even your spouse but make sure your trust him/her. An outsider can point out weakness that you may never notice. Always remember the fact that the consumer will test your product inside out because they are paying for it. So if you want a judgment or spot a weakness in your system, have someone who has an overall idea about what you are doing and see if he/she likes what you are doing!

Seek help: if you are not good at small business planning, hire a mentor. He will set questions like ‘…have you considered this?’ or ‘what will you do if…?’ These help you focus more on your business and keep you on the toe. You will need your business to be on strong grounds and ready for challenges.

The community is your network: involve yourself in another network than the one you already have. This will give you an idea of where you actually are. You may learn something new from other businessmen and get a good picture of the competition they pose. To truly understand the depth of the market, you must have a wide network that will help you and push you at times.

Competition for betterment is never bad, too much of it is. Small business planning cannot only help you in the long run but makes the journey more interesting.